Pricing Of Substitute Under Social Influence

With the development of social network,people spend a lot of time on social network every day,and they usually contact friends and get information through social platforms.Therefore,such a convenient way to obtain information that consumers will be easier to reference to other people's views and experience through the social network when they are making a purchase decision.The influence of others' views and experience in the social network on consumers' purchase decision,we call it "Social Influence".In the presence of social influence,consumers will not only consider their utility,but also consider the utility of social influence.Especially when consumers are strategic,they will have more opportunities to know other people's evaluation of the target product through the social network platforms when they are waiting for purchasing,which makes the social influence more remarkable.For sellers,consumers may be led to buy a product collectively,and cause the other substitution products to be unsalable under social influence,which will make the sellers loss their profit.Therefore,considering the above problems,how to make a reasonable pricing strategy to ensure the maximum profit of a seller who sells substitution products in the face of social influence has become a realistic and urgent problem.In this paper,we consider a pricing problem of a monopolist retailer sales two kinds of substitute products which have different quality under social influence.Based on dynamic game model,we analyzed the game between the sellers and the consumers,and we figured out the optimal pricing strategies of sellers when consumers are myopic and strategic who are effected by social influence.Establish a profit maximization model,and analyze the social influence on the optimal pricing strategies and the maximum profits of the seller.First of all,we study the purchasing behavior of consumers in the face of social influence,establish the utility function model of consumers and the profit function model of sellers,and analyze the dynamic game process between consumers and sellers.Secondly,when consumers are myopic(there is only one stage of sale in the market),we consider the influence of social interaction on myopic consumers' purchase decisions,and add social utility to myopic consumers' own utility.On the basis of that model,the consumer's purchase decision is analyzed,and the social influence on the pricing strategies and profit of the seller is studied.It is concluded that the greater the social influence of high-quality product is,the higher the optimal pricing of high-quality product is and the lower the optimal pricing of low-quality product is,and the maximum profit of the retailer decreases first and then increases when the seller faces myopic consumers.Finally,when consumers are strategic,there are two stages of sale in the market.Based on this model,we have studied the pricing decisions of retailers and the impact of social influence on sellers' pricing and profit.It is found that,for different parameter ranges,the social influence on sellers' optimal pricing may be different.